Online education versus the traditional university

Peter Drucker once said, "Universities won't survive. The future is outside the traditional campus, outside the traditional classroom."

That was nearly two decades ago. And yet universities survive and prosper. Drucker saw the rising costs of university education as undermining the edifice of the university. He thought it inevitable that substitutes such as online education would displace the traditional university.

That hasn't happened.Why so? An article in the FT puts it down to vested interests in higher education:

Currently teaching is delivered in much the same way in schools as it was 50 or even 100 years ago. A single teacher talks to a classroom full of pupils, who work with textbooks, paper and pens. Few pupils are examined online. Libraries are still full of reference books but no tablet devices. Not only is this model out of date but in many countries, including Britain and the US, it is not proving effective – especially at teaching the skills employers want for the workplace.

....Unfortunately, the educational establishment, at both secondary and university levels, is too slow to change. I suspect that a resistance to new techniques of learning is partly about protecting jobs and defending senior staff whose skills are outdated. Why on earth do schools in Britain still put so much emphasis on teaching French? They should be teaching languages more relevant to the 21st century, such as Mandarin or Spanish. Why can’t schools equip pupils with up to date information technology skills? Perhaps their instructors are not up to the task – or possibly their processes are wrong.

Well, I am not sure that's the whole story. We need to be realistic about what can be taught online and what cannot be taught. Some basic courses, yes. A range of basic arts, science and management courses can be taught. But medicine or higher science or engineering? You need labs for all these.  You also need a fair degree of interaction between teacher and taught. And, yes, quality can be ensured only through rigorous exams that are difficult to operationalise on a mass scale.

There are other problems. Universities don't only teach. They are also into research (some would say of the leading universities that they are also into teaching). Is it possible to separate the production and imparting of knowledge? What would be the appropriate mechanisms for doing so? Can we researchers in specially funded institutions who do only research. And others at colleges who only need to teach. In the process, do we lose something? Finally, what about the benefits of student interaction on campuses, the advantages of networking etc?

We need to be realistic and walk on two legs, to start with. We need business models that will make mass provision of basic skills and knowledge viable through online education. Universities need to find a way to do this. However, it may be premature to think of online education as the only or even principal instrument of education, at least at the higher levels.

Last minute justice

There has been comment on the recently retired Chief Justice of the Supreme Court Altamas Kabir's delivering judgement on the NEET, the common entrance test for medical colleges, on his last day in office. The eminent lawyer, Raju Ramachandran, writes in the Hindu that this is by no means novel. There are several instances of judgements being delivered on the last day or close to the retirement of a judge.

The issue is not somebody delivering judgement on the last day or close to the date of retirement. When a judge takes up a case or is part of a bench that admits a case, he has no means of knowing when the case will conclude. The actual writing of the judgement, one would imagine, takes a few days and, therefore, the fact that a judgement is delivered on the last day need not detract from its merits.

The key issue, as Ramachandran points out, is whether judges have had adequate time to share views with each other. A judgement delivered on the last day of a judge's tenure would not be a problem if it has been preceded by adequate consultations amongst judges on a bench. That this does not happen very often is the real cause of concern. Ramachandran cites examples:

Kesavananda Bharati (1973) is the most celebrated case in Indian constitutional law. It is the majority opinion in this case which laid down the basic structure doctrine (that the power of Parliament to amend the Constitution did not extend to destroying its essential features). In his judgment, Justice Chandrachud (a ‘minority’ judge) wrote that the impending retirement of Chief Justice Sikri did not leave enough time after the conclusion of arguments for an exchange of draft judgments. Of the 13 judges who constituted the bench, he said that he had the benefit of fully knowing the views of only four of them.

.....Many years later, a nine judge Bench of the Supreme Court decided by a majority that primacy in the matter of appointments to the superior judiciary vests with the Judiciary and not the Executive (Supreme Court Advocates on Record Association, 1993). M.M. Punchhi, a dissenting judge, wrote in his judgment that he had hoped that some “meaningful meetings” would be held, so that the court could strive to reach a unanimous decision. He complained that he was “overtaken” when he received the draft opinion of Justice J.S. Verma for himself and on behalf of four others.

Ramachandran proposes some remedies. One, a permanent Constitution bench whose  composition would remain fixed for a full court term. Another is that, from about three months before their terms are ending, judges should stay away from "heavy" cases. Perhaps, one could also have a disclosure requirement for judgements delivered by a bench: the presiding judge must disclose whether the judgement has been preceded by exchange of views or consultations amongst the judges.

Why are American companies not investing?

Profits of American companies are at a record high; the cost of capital is at a record low. Yet American companies are not investing. The facts: pre-tax profit are 12% of GDP while investment is a mere 4%. Why? An article in FT attempts to shed light on this mystery:

• Excess capacity was created in the boom years and this effect has to wear off before fresh investment can begin (one notable area is housing)
• Excessive regulation is stifling investment (for example, the high costs associated with compliance).
• Profitability has been boosted by more use of IT, which replaces workers with computers. But this does not explain why higher profit is not being ploughed back into investment
• Investment is happening but it is intangibles such as brand-building, research and better organisation
• High profitability reflects rent from monopolies (Paul Krugman)
• Wall Street's focus on quarterly numbers means that it makes more sense to focus on cost-cutting and efficiency than on risky investment, especially when the economic outlook is murky
• Profits are being appropriated by avaricious managers rather than going into investments that would benefit shareholders

 None of these would explain the phenomenon fully but, together, they add up to a worrying narrative. As the author indicates, it's time for policy makers to get their acts together. 

Bailouts need not mean losses to taxpayes

When failed banks are bailed out, these are seen as losses to tax payers. This need not be so, as an article in FT points out. The US Treasury made a profit of $5 bn on its investment in AIG and another $4.5 bn on its investments in Citigroup and Bank of America. In the UK, the government has broken even on its investment in Lloyds Bank. It also cites instances where central banks that bought securities - whether of corporates or sovereigns- stand to make profit.

In other words, intervention to save failing banks not only prevents economic collapse but also ends up as gain for the tax payer over time. The operative expression is "over time". What is seen as a "bailout cost" is a cost only at the point of intervention. The case for public intervention to save failing banks is thus overwhelming.

Where do these profits come from? Well, in a financial crisis, assets tend to be hugely undervalued. There is enormous under-shooting in prices. The moment economic calm returns, there is a good chance that prices will move up.

This is not just a foreign phenomenon. The government of India ended up making a huge profit on UTI through SUUTI. Only, the gains did not accrue to the holders of UTI units who were fobbed off with securities carrying yields of around 6% because they were not given a call option on the government investment in SUUTI. The UTI "scam" in which  managers were said to have ripped off investors through bad investments has, in fact, turned out to be a bonanza for the government. So much for the "scam" of which the media had made an enormous hullabaloo at the time.

Does the RTI Act cover political parties?

Political parties are up in arms against the CIC judgement which says they are public authorities
and hence within the purview of the RTI Act. The public is infuriated that political parties should be opposed to the CIC order. It sees this as unwillingness on the part of the political class to practise transparency. Are political parties being unduly cussed in the matter?

People are entitled to their views on whether it is desirable to bring political parties under the purview of the RTI Act. The important question, however, is what the RTI Act, as it stands, has to say on
the subject. In other words, how sound is the legal basis for the CIC's judgement? An article
in EPW raises this question and comes to the conclusion that the CIC's judgement is rather infirm.

The author, Anirudh Burman, points out that the CIC gave three reasons in justification of its judgement: political parties “are continuously engaged in performing public duty”, receive sub-

stantial financing from the government and have important constitutional and legal rights and liabilities.". He opines that the the last reason given has no legal basis as "This criterion is
not present in the definition of “public authority”at all."

He then scrutinises the other two reasons. Can political authorities be said to be
"public authorities" because they perform public functions? He thinks not- nowhere in
the Act is a "public functions" test specified for determining whether an entity is a public
authority. Who can be considered public authorities is laid down down very precisely in the
Act. The CIC also refers to the fact that political parties are registered with the Election Commission
and argues that this makes them somewhat similar to entities to established by government.
However, there is a Karnataka High Court  judgement that ruled that goes against this stand.

What of the argument that political parties get "substantial financing" from government? The difficulty, Burman points out, is that the CIC has steered clear of defining what constitutes "substantial financing". He argues that unless it can be established that, without the support they receive from government, political parties cannot carry on with their activities, they cannot be
said to receive ""substantial financing".

It is important to distinguish between transparency in respect of funding of political parties
and the broader transparency required under the RTI Act. In respect of activities not related
to raising funds, Burman argues- correctly, in my view- that transparency may not be desirable
and may pose obstacles to their effective functioning:

First, as a body seeking to outdo other competing parties, a political party has the

right to keep certain parts of its activities hidden from public view.  .....Second, in light of the fact that the RTI creates this information asymmetry, theRTI mechanisms may become a tool of political warfare rather than a tool forpromoting transparency.

The danger is stretching the RTI Act to cover entities it was not intended to is that it may
end up discrediting the Act itself, quite apart from rendering the entire political class
hostile to it.In the process, a most valuable instrument of empowerment and the purpose
of rendering a whole range of public authorities accountable may fall by the wayside.

How IIM came to Ahmedabad

How an IIM came to be located in then obscure and small-town Ahmedabad and not in Bombay (as it was then called) has been much written about. The automatic choices were the two leading industrial cities of the time, Bombay and Calcutta. The latter got an IIM, the first to be set up; a few months later in 1961, the second IIM came up, not in Bombay, but in Ahmedabad.

The official version (which I have reported in my book on Ravi Matthai- IIMA) is that Bombay University dragged its feet over the idea as it not comfortable with an autonomous institution within its fold. Vikram Sarabhai, with the backing of industrialists in Ahmedabad, used his clout in government to claim the IIM for Ahmedabad.

In his memoirs (A book of memory), well-known pscyho-analyst Sudhir Kakar has a different story to tell. He contends that Sarabhai got an IIM created in Ahmedabad primarily in order to retain Kamla Chowdhry, an academic then working at ATIRA, with whom Sarabhai had a long and intimate relationship. (Chowdhry happened to be Kakar's aunt).

Chowdhry, Kakar says, began to get uncomfortable in the triangle that had Sarabhai and Mrinalini at the other two ends.  She began to toy with the idea of accepting an offer from DCM in Delhi which was similar to the work she was doing at ATIRA. Sarabhai "used every means at his disposal to persuade her to stay back in  Ahmedabad". He dangled the prospect of a directorship of a research centre on group dynamics, funded by an American foundation.

This didn't work out and three years later, Chowdhry envisaged a move to ASCI in Hyderabad or to Bombay University. This time, Sarabhai offered her a chance to work with a branch of UK's Tavistock Institute in Ahmedabad. This too did not happen.

Finally, as Kakar puts it, "To keep Kamla in Ahmedabad, Vikram Sarabhai successfully lobbied the Indian government to locate one of the two postgraduate institutions of management ....... in Ahmedabad rather than Bombay." Not only that, since Sarabhai and Chowdhry both had connections with Harvard, the original collaborator with IIMA, the University of California, came to be replaced by Harvard.

Kakar bases his narrative on the private papers of Chowdhry. The conclusion he draws is illuminating:

"The letters (from Sarabhai to Chowdhry) are also cautionary for any historian who still believes that decision-making in institutions, whether private or those of the state, is independent of the personality and the emotional needs of the actors, that the public record is sufficient to fully explain the course of a historical event......the location of the IIM at Ahmedabad rather than in Bombay and its collaboration with the Harvard Business School.... had as much to do with the demands of the relationship between Vikram and Kamla (if not more) as with the rational deliberations captured by the public record."

Hogwash on dilution of the IIT brand

A section of the media has gone to town on the subject of some 700 odd students turning down IIT offers. This is construed as a dilution in the IIT brand for whatever reason: poor quality of infrastructure and faculty at the newer IITs, the impact of quotas for SC/STs and OBCs, or the availability of other institutions that are better (although I would myself be hard put to identify these).

This is plain hogwash, as Dinesh Mohan makes clear in an article in BS. He points out a number of reasons why some offers may not be getting accepted:

Students have become acutely aware that all disciplines do not offer challenging or rewarding jobs after graduation (such as civil, production, textile, and many others). Therefore, some of them may prefer to go to an NIT closer to home that gives them an opportunity in a discipline of their choice. Studying at an IIT for undergraduate students can cost about Rs 20,000 a month, not a small amount for a middle-class family. Some of those declining may have opted to spend less by studying at a local NIT instead of a new IIT and save on hostel expenses.
A significant proportion of the students entering IITs know from day one that they are not interested in an engineering career, but do so under parental and societal pressure or a lack of choices for obtaining decent education. If there was a good supply of excellent liberal arts and science colleges with hostel facilities, applications to IITs may drop by a third. It is possible that some of those declining an admission to IIT have gained admission to good law schools, design schools or science colleges that have made a name for themselves in recent years.
Lastly, there would be a group of young men and women who would prefer to spend much more money and go to an institution in the US, Australia, Singapore or the UK, even a second-rate one, than take admission in a discipline and IIT location they don't like. Therefore, the fact that many applicants have opted out of the IIT system may be a good sign, showing that we have more choices and the system is maturing. It certainly does not reflect on the standing of IITs as academic institutions in India. 

The proposition that the entry of newer IITs is diluting the IIT brand would be strictly true only if the older and more reputed IITs fail to fill their seats because of a perception that IITs are not what they were. Nobody has argued that this is the case. We need data on how many seats at which IITs were rejected.

A similar apprehension was raised in respect of the newer IIMs. It's a fact that many of the new IIMs could not place all their students in the last round of Placement. Has this impacted IIMA, the market leader? Not one bit. IIMA achieved 100% placement. The newer IITs and IIMs will take a while to establish themselves. That is very different from saying that the IIT or IIM brand will go into decline because of them.

Incidentally, Dinesh Mohan's article last year on why the JEE should be abolished is also worth reading.

A bold blueprint for banking reform

Several committees have gone into the financial crisis and come up with prescriptions for avoiding such disasters in future. Except for a modest increase in capital requirements, some proposed restrictions on proprietary trading in the US and an attempt to ring-fence retail operations in the UK, we have not seen any significant reforms so far. Reforms that will radically change the way banks will be run.

It was a pleasant surprise, therefore, to see a report from UK's Parliamentary Commission on Banking Standards that squarely addresses basic issues in the functioning of the banks- the accountability of bankers, incentives in banking, the role of bank boards, culture and standards in banking, competitiveness in UK banking, the privatization of  RBS and Lloyd's, etc.

Anybody interested in the governance of banks should peruse this two-volume report- they are a terrific read. The reports have gone almost unnoticed in the Indian media. After going through them, I was left wondering how a parliamentary commission could have come up with such an insightful report where expert bankers, regulators and economists have fared not so far. I guess it's not a matter of knowledge but of intention or sincerity. Bankers have their own axes to grind when it comes to reform; they have been thwarting serious reforms since the crisis. Regulators and academics are prone to capture by business lobbies.

Politicians are not exempt from capture either. It's just that the public mood towards bankers is so sour, especially in the UK and the rest of Europe, that politicians cannot afford to ignore it. I have said this before and will say it again: there is accountability in politics in a way there isn't in the corporate world or amongst professionals such as lawyers, doctors, accountants and even academics.

I have analysed the report in an article in the Hindu, Making bankers pay for failed gambles. I have strongly recommended that many of the proposal for reform proposed by the Commission should be embraced by the RBI.

The electoral arithmetic of Modi's bid for PM

Ashutosh Varshney, professor at Brown University, has done the Math on what it would take Modi to become PM in this article in IE:

When the BJP won 182 seats in 1998 and 1999, it captured 25.6 and 23.7 per cent of the national vote respectively. In 2009, it won a mere 18.8 per cent (and 116 seats). Though, under certain exceptional circumstances, one can show that a party can win 180 seats in India's Parliament with only 18-20 per cent of the national vote, a more reasonable assumption is that 24-25 per cent of the national vote will, in all probability, be required for 180-plus seats. In short, Modi needs to raise the BJP's vote by 5-6 percentage points.
In 2014, the size of the electorate is expected to be a little over 800 million. Assuming a 60-62 per cent turnout, we will have roughly 500 million voters. A 5-6 per cent increase in the BJP's vote essentially means that Modi will have to deliver an additional 25-30 million votes .

Varshney is sceptical about Modi being able to bring it off in 2014:

Of the 500 million likely voters in 2014, only 150 million will be urban, and of these, only 90 million are in the west and north. The BJP has already won a lot of these votes in the previous elections. Can Modi really mobilise an additional 20-25 million votes from this northern and western pool, assuming he can get 5 million more elsewhere? 

The order is monumentally tall. Advani may well have the last laugh next year unless a broad anti-Congress alliance can be constructed. With urban India rising, Modi's power to pull votes could be greater in the 2019 or 2024 elections, but might fall well short in 2014.

Should industrial houses be given bank licenses?

Well, not in the first round at least. But not for the reasons that is often cited: the danger of inter-connected lending, that is, banks floated by industrial houses lending to companies within the group. This, critics, say could sink the banks if something goes wrong with the group.

I happen to think otherwise. I doubt that the reputed industrial houses would let banks floated by them sink: they have too much at stake. They will go all out to make a success of their banking ventures. However, while their banks will prosper, this will come at the expense of existing players, mainly public sector banks (PSBs). Does this matter? Yes, because it will create systemic risk in India banking. PSBs are in the forefront of financing infrastructure and agriculture, areas that badly need credit. Private banks, including those set up by industrial houses, will focus on a narrow set of corporates and high net worth individuals. This does little for the cause of financial inclusion.

More in article in Indian Express, Banking on inclusion.

Nilekani and Pai too to return to Infosys?

I had to pinch myself in disbelief when I read this report in IE:

The Street has welcomed NRN's return, confident it would boost employee morale, but analysts realise chances of him being able to turn around Infosys aren't very high. For one, NRN is 67 and has been away from an executive position for seven years, during which the environment has turned more competitive and Infosys weaker. With Nilekani and Pai at his side though, it could be a different story.

Modi in Uttarakhand: the bare facts

Gujarat CM Narendra Modi's visit to Uttarakhand predictably degenerated into slugfest between the BJP and the Congress. When Rahul Gandhi followed, the media tended to portray the two visits as  a competition for photo-ops.

Writing in ET, Madhu Kishwar has a different story to tell. It would appear that Modi was quickly able to mobilise a significant rescue effort targeting principally the large numbers of Gujarati pilgrims but not entirely excluding others. Here's a sample:

Modi arrived in Delhi late 17th night for a meeting with the Planning Commission on 18th when news of cloudburst and landslides was telecast on TV. He held an emergency meeting to take stock of the situation since he knew that thousands of Gujaratis are likely to be among the Chardham pilgrims . Right away, a camp office was opened at Gujarat Bhavan and the Resident Commissioner's team in Delhi was made responsible for coordinating with Gujarati pilgrims.
...On the 18th morning, Modi called Dr Pranav Pandya of the All World Gayatri Parivar to provide space and infrastructure in his Shanti Kunj campus for the relief centre proposed to be set up by the Gujarat government . He chose this campus because of his close knowledge of, and rapport with, this Gandhian institution that can house and feed thousands of people at a short notice.
It has a 2,000-strong community of swayamsevaks on the campus, plus 3,000-odd students of the Dev Sanskriti University. The campus also has a well-run hospital.
On the 18th evening itself, a set of computers with internet connections , telephone lines, television sets and all other paraphernalia required for Gujarat government's relief operation were set up. Therefore, when a team of Gujarat government IAS, IPS and IFS officers came, they could get going within minutes of reaching Shanti Kunj.
Team Gujarat had two officers from Uttarakhand - Assistant Director General of Police Bisht and Forest Service officer SC Pant - who had close knowledge of the terrain to guide both the stranded pilgrims as well as rescue teams on the safest possible routes to take. ADG Bisht went straight to Gupta Kashi from where the rescue operations are being launched.
A team of seven doctors trained in handling such emergencies, led by an orthopaedic surgeon, not only put in place an efficient first-aid service but are also attending to those severely injured.
 

It is open to people to come to their own conclusions on how much of a difference these efforts made, considering the large number of people left stranded in the region.  I do find it surprising, however, that the media did not think it necessary to bring the above facts to the notice of the public. We had swarms of reporters and TV crews in the region but at least I did not find any details of the contribution that Modi was able to make.

Kishwar concludes:

The Congress party is understandably upset because its chief minister has proved a disaster, its party machinery is in disarray, Congress Sewa Dal workers are nowhere in sight, Rahul Gandhi's Youth Brigade is clueless even in routine situations , leave alone know how to face a crisis like the Uttarakhand deluge.

That is the reality of the Uttarakhand relief operation led by Narendra Modi

QE reversal: how bad is it for emerging markets?

Quantitative easing, which sent money flooding into emerging markets, is due to be reversed. It will be a slow reversal, nevertheless, the trend is clear enough. How badly will it hit emerging markets. FT lists a number of positives in emerging market economies in today's environment compared to, say, the 1980s or 1990s:

In many respects, the developing world is also strong enough to deal with any fallout from a change in the US monetary regime. During previous crises, many countries had pegged exchange rates, low reserves, rigid economies and big US dollar-denominated debt burdens. These vulnerabilities have mostly been addressed.
The latter factor – what economists call the “original sin” of emerging markets – has in the past proved particularly toxic. Historically a strengthening US dollar has spelt trouble for emerging markets due to currency pegs and foreign liabilities. But classic original sin has now been much reduced.

.....Emerging markets are also far less indebted than developed countries. The overall credit-to-gross domestic product ratio is about 70 per cent against the 145 per cent average for advanced economies, according to the International Monetary Fund.
And although economic growth has disappointed recently, the IMF still estimates that output in developing countries will expand an average of 6 per cent annually between 2013 and 2018. Ample foreign currency reserves will act as insulation against any market chills.

Even if money is less freely available, the distribution of it between developed and emerging markets could change, given better growth prospects for the latter. Leading funds could increase their allocations for emerging markets:

Norways's $700 bn sovereign wealth fundlast year changed its bond index to give emerging markets a bigger weighting. Other big SWFs have followed suit. But many investors have been slower. US pension funds and insurers have an average of 4 per cent of assets allocated to emerging markets but many aim to double that over time. Each additional percentage point increase in portfolio exposure would funnel $485bn into emerging market bonds alone, according to estimates by BlackRock.

What does this bode for India? Our problem is not the wide current account deficit alone; it is faltering growth, given that private investment has dried up. Unless public investment can take its place, growth prospects will not improve and foreigners' willingness to finance our deficit will be not be strong. That said, our strong point is the long-term allure of the Indian market. FII flows will be hesitant but FDI flows should continue- note that the average FDI flows into India post the financial crisis has been higher than in the boom period before the crisis.

Chinese 'incursion' into Daulat Beg Oldie: what's the truth?

There was terrific outcry in the Indian media over the reported Chinese 'incursion' into the Daulat Beg Oldie sector in Ladakh sometime in April this year. Various interpretations were given. China was flexing its muscles, given its new found economic and military might. The move was intended to force India to the negotiating table. China was upset over India's aligning closer with the US. And so on. And there was a large section of the media, particularly TV, that demanded a strong response to the Chinese 'provocation'.

As we know, following negotiations the Chinese dismantled the tent they had set up and the small platoon they had sent in went back. There is no clarity on what assurances the Indian side gave.

In an article in EPW, Neville Maxwell casts serious doubts on the view that the Chinese were upto mischief. Maxwell, a London Times correspondent in India during the India-China war of 1962, is the well known author of a book on the war that squarely laid the blame for the war on Nehru's unilateral attempts to define the border with China, without any regard for Chinese claims.

In his article, Maxwell says that India has been engaged in a substantial build-up in the sector and asks whether the Indiani military is responsible for raising Chinese suspicions:

Since last year there has been a significant Indian build-up at DBO. Indian newspapers have reported reinforcement of the garrison, the induction of heavy artillery, even armour, and a landing strip laid in 1962 has been reactivated to facilitate supply. What is the Indian purpose? A Chinese invasion at that point is inconceivable, so it cannot be defensive. A 1993 treaty bound both governments to reduce force levels on the LAC “to a minimum level compatible with friendly and good neighbourly relations”. From what level or element of the Indian state does the impetus for this force augmentation come? From the military? 

I do not recall any mention in the media of heightened Indian military activity in the area- all I read and heard was that the Chinese had penetrated several kms into Indian territory. Even the latter may not be correct because the Line of Actual Control is undefined and which piece belongs to whom is   a matter of perception.

Maxwell reiterates his well known view of India's handling of the border dispute:

... it all began with the British. In 1914, they attempted to induce China to cede a significant tract of territory to give India a “strategic frontier” in its north-east. They failed. In the mid-1930, they revived that attempt, this time shunning diplomatic niceties and, taking advantage of China’s impotence, simply annexing the target tract, while forging the official diplomatic record to cloak their action with spurious legitimacy. No doubt they expected that in due time China would get over its indignation and acquiesce to the facts on the ground (and they were right there, the PRC was ready to legitimise the situation).

Thus a border dispute with China was congenital to independent India – and Nehru rendered that affliction incurable by sustaining the British falsification and refusing to submit the dispute to negotiation. Then he metastasised it by laying claim to the Aksai Chin area in India’s north- west, a claim without British precedent or any basis in treaty, usage or geography, deluding the Indian public by having new official maps published falsely showing the whole of India’s northern borders as settled and internationally agreed.

 When we can expect more balanced reporting in India, whether in respect of China or Pakistan?

TRAI's radical proposal for India's newspaper industry

No government has dared to attempt such a move thus far but TRAI is doing it. According to a report in the Hindu, TRAI plans to introduce measures to separate corporate ownership of newspapers from editorial management. This is meant to insulate editorial operations from commercial interests. Rahul Khullar, chief of TRAI, is quoted as saying:

The idea is to create an institutionalised buffer between the corporate owner and newspaper management to ensure the independence of TV channels and the print media to articulate impartial, free and fair editorial policy,” said Mr. Khullar. He, however, admitted that the process was still “in the works”. The “creative challenge” for TRAI was evolving the precise design. 

One needs to be clear what corporate ownership means- does it mean ownership by industrial houses? In other words, would owners of newspapers, who do not have other corporate interests,be exempt from such a measure? One would think so. It should be possible for somebody to own a paper and express himself editorially, as long as he does not have other business interests that might colour news coverage or editorial opinion in his paper.

Khullar also plans to go ahead with restrictions on cross-ownership of media. The rule being contemplated is two out of three: you can own two out of three media,namely, newspaper, radio and TV but not all. Incidentally, I am not clear as to how the newspaper industry would come under the ambit of TRAI. Can anybody shed light on this?

Government will always call the shots in public sector banks

From time to time, we are fed homilies on how the government here should run public sector banks. Banks should be given 'genuine' autonomy, meaning matters should be left to boards. The finance ministry must not interfere in selection of bank Chairmen. It must stay out of banks' strategic planning. I have always found this unrealistic, however lofty it might sound. As an authority accountable to parliament for the banks under its control, government will always have a say- how much say is desirable can always be debated.

A case in point is the CEO of RBS in the UK being given marching orders. It is generally understood that the Chancellor of the Exchequer, George Osborne wanted him out. The UK government has an 82% equity stake in RBS (greater than the Indian government's stake in SBI0 consequent to the capital infusion it made during the financial crisis.

A commentator, writing in the FT, has strong words on the ouster:

The state, as majority shareholder, clearly has every right to remove the chief executive if it lacks confidence in the strategy, and Mr Osborne had legitimate concerns. From the perspective of a government preoccupied with lending to the UK economy, Mr Hester’s stubborn attachment to the bank’s US arm or its politically toxic trading unit must have seemed puzzling at best.

But what the state must not do is to back-seat drive on day-to-day management issues. It is not the government’s place to intervene directly in questions such as how much employees are paid or to second-guess decisions to invest in specific lines of business. Those are decisions for managers. But Mr Osborne has interfered in both.

Which sounds fine in principle but what is the government to do if the board is ineffective- and the article clearly suggests it was- and if it is obliged to respond to the public on sensitive issues such as managerial pay? The UK government's principal concerns about RBS have been a failure to step up lending and a failure to return to healthy profits. Where a CEO cannot address these concerns, the government has no choice but to intervene, especially given the importance of RBS in the banking sector.

So, you see, it happens not just in India....

"Lessons" from the labs for businesses

I write "lessons" within quotes because I am somewhat wary of role models, whether individuals or institutions. Imitation of role models is harmful because it ignores the uniqueness of individuals as well as institutions. Approaches and solutions must always be specific to a given context.

With that caveat, I commend an article Schumpeter wrote in the Economist a few weeks ago about what business can learn from large research projects. He talks about Atlas, the world's largest microscope, whose components were designed by hundreds of scientists from different institutions and whose components were sourced from 400 suppliers on four continents. Atlas was responsible for catching the Higgs boson last year. Such large research projects have some things in common with businesses and they also differ in some respects:

“Big Science” projects differ from companies in important ways. They are publicly financed and do not seek profits. They are also one-off affairs, with no need to maintain supply chains or manage long-term relationships with customers. Yet, like companies, they must innovate furiously, make the most of limited resources and beat rivals to breakthroughs.

The key to success is allowing talented individuals free rein for expressing themselves, which allows every issue to be comprehensively debated, and everybody to understand exactly why a certain idea has won out.

In a Big Science project, teams with rival proposals spar publicly, forcing all the boffins to articulate their assumptions, justify their choices and learn enough about their rivals’ ideas to criticise them at length. ....The sparring takes a while, but the lifetimes of Big Science projects are measured in decades. Besides, a good scientific scrap fosters the exchange of ideas and ensures that advocates of losing proposals understand the winning ones, which they are expected to work on. Battles allow boffins to let off steam, so grudges seldom fester. 

That's the big difference between the corporate world and large scientific projects. Companies are, in general, run autocratically, with "bosses" - and, that too, a few of these at the top -calling the shots, without much challenge from those below. Companies can be far more innovative, nimble and successful if they can operate in a decentralised and democratic way. Why don't they do so? Well, one reason certainly is that those at the top can produce results for a limited period and laugh their way to the bank without having to worry about the company's long-term success.

Succession at BJP

Narendra Modi's appointment as head of the poll committee of the BJP, which could be a prelude to his being projected as candidate for the post of PM, is a tribute to the working of grassroots democracy in India. It is said that the RSS backed his candidature. Maybe, but this in itself would not have been adequate to deal with opposition from the stalwarts of the party, such as Advani (and, if reports are to be believed, Jaswant Singh, Yashwant Sinha and Uma Bharti).

BJP President Rajnath Singh and other senior leaders found it impossible, at the end of the day, to ignore the groundswell of support from the party cadres. It is a tribute to the working of Indian democracy that these voices from below can make themselves heard.

This is not the first time that this has happened in the case of Modi. Following the Gujarat riots in 2002, then PM Vajpayee was under tremendous pressure from various quarters to send Modi packing. His own instincts were in favour of such a move. And yet Vajpayee could not act, again because it would have meant displeasing the rank and file of the party. This is the assertion of inner-party democracy and, whatever reservations people may have about the outcome, it is a phenomenon that deserves respect.

Can Modi bring it off for the BJP? His critics say he is a divisive figure and that he will scare away potential political partners. His track record suggests otherwise. As a boy, he ran away from his family in a village and thereafter proceeded to fend for himself. He comes from a backward caste and lacks the trappings of education as well as family support. In a country where politics is still centred on caste, he has been able to create a coalition of forces that transcends caste barriers and win three consecutive elections. At the national level, he can be expected to similarly make a direct appeal to the masses on the strength of some overriding slogan, say, development or governance. It is more than likely that, as elections approach, other political parties will find it expedient to join hands with the BJP as they see the mood of the people swinging in the BJP's favour.

Note the contrast between the succession process at a political party, such as the BJP, and a reputed corporate such as Infosys. At BJP, the old guard has been brushed aside on grounds of performance and the reins have passed into the hands of a proven achiever. At Infosys, the leading member of the old guard is back in the saddle on the ground that nobody can else is as suited to rescue the company. That is because nothing resembling democracy can be seen in most companies; decision-making is centralised and the wishes of various stakeholders, or even of the majority, go unheard. And politicians are said to be bad at governance; India's companies are said to be models of good governance.

Nature's way is to ruthlessly discard the old and to promote the young. It is ironical that political parties, which are maligned day in and day out for poor governance, are better tuned to the laws of nature than the vaunted heroes of the corporate world

Guess who's coming to dinner?

Harish Khare has a hard-hitting piece on the attitudes of India's corporate chiefs, as seen in Narayana Murthy's decision to come back to Infosys with son in tow. He narrates an incident involving a dinner invitation that NRN gave PM Manmohan Singh in connection with the Infosys Social Science awards function:

In the first week of 2011, Prime Minister Manmohan Singh allowed himself to be persuaded to accept N.R. Narayana Murthy’s invitation to travel to Mumbai to preside over a function to give away the Infosys Social Science Prizes. The Prime Minister even agreed to attend a dinner that Mr. Murthy wanted to host in his honour after the function at the Taj Mahal Hotel. So far so good. A few days before the event, there was a massive behind-the-scenes dust up between the Prime Minister’s staff and Mr. Murthy. The rub was that Mr. Murthy thought that since he was paying for the dinner, he had a right to dictate not only the guest list but even the seating arrangement. However, there is something called protocol and the dignity of constitutional offices. If the Governor and the Chief Minister of Maharashtra were to be at the dinner, they had to necessarily be seated on either side of the Prime Minister, whereas the host thought he ought to be sitting next to Dr. Singh. Mr. Murthy, however, was not one to be so easily rebuffed. As soon as the first course was served, he sought to convert the evening into a grand intellectual conversation and proceeded to invite his son to open the bowling. And the young son wanted to know from the Prime Minister what the government proposed to do so that young men like him could come back to India.

He refutes the suggestion that NRN is free to do what he likes because Infosys is a private company:

Mr. Murthy is not just a private businessman, minding his own business. He has often sought to inject himself into the public domain, telling a thing or two to the political class about how to behave. He has been serenaded as an “iconic” entrepreneur. During the heyday of civil society triumphalism two years ago, there was even a suggestion that Mr. Murthy be made President of India. That was the time when India’s corporate leaders thought they had the ethical credentials to write open letters to the Prime Minister and preach virtues of good governance.

One might add that NRN is not the sole stakeholder in Infosys- it is a company with widely held share ownership in which the promoters have a small stake. This is very different from industrial houses where businessmen have dominant, if not majority, stakes. 

Bringing back a former CEO- pluses and minuses

N R Narayana Murthy's return to the helm of affairs at Infosys is still being debated. FT's management editor and business editor weigh the pluses and minuses of bringing back a former boss in the context of another much heralded return- that of A G Lafley of P&G. (Incidentally, Lafley claimed that one of his biggest contributions in his term had been the succession planning he had put in place, starting almost from day one. Evidently, events proved his choice- and that of the board- wrong).